Republican tax plan poised to benefit rental landlords

A sign advertises an apartment for rent along a row of brownstone townhouses on June 24, 2016 in the Brooklyn borough of New York City.

The tax plan could also add to some of the issues that are already making homeownership more difficult, namely lack of supply. If the cap on the mortgage interest deduction were reduced from the current $1 million in mortgage debt to $500,000, which is in the House plan, current homeowners would be grandfathered into the original cap. That would give them much less incentive to move, thereby reducing the number of potential homes for sale.

One hit to investors, however, could be a drop in home prices. Investors not only gain income from monthly rent but from the appreciation of the asset. Several housing industry reports have predicted that home prices could drop as much as 10 percent as a result of the tax bill.

Miller agrees that prices could fall in more expensive markets, but most single-family investors don’t operate in high-cost areas.

“I just don’t think it’s particularly likely in the lower-cost markets where most people don’t itemize to begin with, and if they do, they’re more likely to see a benefit than a hit,” Miller said.

The biggest variable will be demand — does it increase or decrease with the tax bill? Republicans would argue that the tax plan will stimulate the economy and put more money in Americans’ pockets. That, in turn, could help more young renters buy a home.

But, at the same time that the government is adding fiscal stimulus, it is also raising interest rates, which could make housing even more expensive.

And that is really the issue for landlords. Home prices continue to rise due to a severe shortage of homes for sale. If the cost of homeownership gets even higher, due to the tax bill and/or interest rates, it will be even more difficult for the youngest and largest generation to become homeowners. That means they will rent longer, and landlords will rake in the profits.